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Industrial production rose 0.2 percent last month, in line with expectations, as a gain in manufacturing offset a drop in utility output, a Federal Reserve report showed. August’s reading was downwardly revised to show flat output.Manufacturing production rose 0.4 percent, with consumer durables rising 0.9 percent as production rose for automotive products and home electronics.”Despite signs of a slowdown in global economic growth, U.S. manufacturing output is still expanding at a solid pace,” Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a note.”The third quarter turned out to be a lot better than some feared, and the economy has a little momentum going into the fourth.”The New York Fed’s “Empire State” index provided a more mixed picture. The general business conditions index contracted for a fifth month in a row, though the pace moderated slightly and new orders improved.The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Graphic - U.S. industrial output, capacity utilization: link.reuters.com/geb54s^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>NO EVIDENCE OF RECESSIONWhile the pace of growth in manufacturing has slowed in recent months — and in some regions contracted — last month’s broader national report pointed to a sector that will continue to boost the recovery.”A lot of people have been fearful that we’re running into a new recession, and the data don’t really show that here,” said Scott Brown, chief economist at Raymond James, in St. Petersburg, Florida.Financial markets were little moved by the data as investors focused on the sovereign debt situation in the euro zone.The Empire State’s business conditions index was up slightly in October at minus 8.48 from minus 8.82. Economists polled by Reuters had expected a reading of minus 4.0.New orders rose to 0.16 from minus 8.0.Employment gauges were mixed as the index for the number of employees rose to 3.37 from minus 5.43, but the average employee workweek index fell to minus 4.49 from minus 2.17.Even so, the outlook for the coming months worsened, with the index of business conditions six months ahead dropping to its lowest level since February 2009 to 6.74 from 13.04 last month.

Why are Bank of America and other large US banks increasing fees for the use of debit cards and other services? The short answer is regulation. The Fed’s low interest rate policy has a big effect on how banks price all services. Specific to ATM fees, Congress has decided to regulate the fees charged to vendors by banks on electronic transactions, essentially cutting this profit center in half for the largest banks that have $10 billion or more in assets. This fee is still far more than the actual cost to the bank providing the service, but such is life in America’s less-than-free market. Like airlines, the “too-big-to-fail” (TBTF) banks are not really profitable, thus pricing of one product is often skewed to make up for shortfalls in another. When you look at the TBTF banks, which dominate the industry in the U.S. today, all of them feature business models where monopoly pricing power and the much abused free market operates. The reasons for this are complex, but the power of the TBTF banks – Bank of America, JPMorgan, Wells Fargo and Citigroup – largely stems from the fact that they remain heavily regulated and protected by these same captured regulators led by the Fed. Thus there is no competition for the services these large banks provide. Despite the gazillions of words written about deregulation in the financial services industry, there is the Bank Holding Company Act of 1956, which provides the Fed with the power to regulate companies that own banks and thus it protects the TBTF institutions from competition. If Google, Wal-Mart and Amazon were permitted to own banks and thereby compete with Bank America et al in the electronic payments business, the cost of electronic payments to small vendors and consumers would plummet. The fact that the Dodd-Frank legislation mandates some artificial relief for consumers and small businesses is lovely, but the real solution to the problem of the TBTF banks and their monopoly pricing power regarding electronic payments is competition. As former Fed of New York general counsel and White & Case partner Ernest Patrikis told me in a 2008 interview: What is the rational for the Bank Holding Company Act and thereby making it more difficult for companies to acquire control of banks? I’ll give you two rationales. First is the Fed continues to believe in the separation between backing and commerce, something for which I do not have a lot of respect. Citicorp’s becoming a one-bank holding company and thereby gaining the ability to engage in all sorts of non-bank services was one prime motivation for amendments to the Bank Holding Company Act in 1968. Which lead me to then ask Patrikis: Well, aren’t we done with the 19th Century? Isn’t Glass-Steagall over and done with? His reply: No, not really. We still have the Bank Holding Company Act. While Gramm-Leach-Bliley greatly broadened the activities permissible for bank holding companies, it has not been entirely eliminated. Few countries in the world have limitations like that, maybe Japan. Most countries do not impose activity limitations on companies controlling banks. With limitations on transactions between banks and controlling persons, is that limitation necessary? Much of what banks do today is not special and does require the vast protective apparatus of the Fed and other regulators, but these same regulators also protect the zombie banks from competition. While protecting deposits and other payment system functions is important, these safeguards exist today and would continue tomorrow if Wal-Mart, for example, were allowed to proceed with its wish to operate a bank. But how about Amazon or Google? While the US banking industry has been successful so far in coercing the FDIC not to process applications by commercial firms to operate near-bank industrial loan companies allowed by some states, the rising consumer uproar over fees for ATM transactions and other services illustrates why we need to repeal the Bank Holding Company Act. My friend Yves Smith, proprietor of Naked Capitalism, urged readers that use Bank of America to “take their revenge. Move your accounts to a small bank. Cancel your Bank of America credit cards. And be sure to let a bank customer services rep know exactly why you are done with them.” I have a better idea: Open up the TBTF banks to competition. That will make the TBTF banks a lot smaller. And the regional and community banks will do just fine in this environment. The truth is that smaller institutions are better at underwriting credit and providing consumers with relevant, reliable services. Give them cheaper, more modern tools and services, and smaller banks will actually thrive. Open up the US banking industry to less expensive transaction processing and other back end services that will come with deregulation of these industries and smaller lenders and agencies will do just fine. Annihilate the TBTF bank cartel in payments and the systemic risk problem will, to use the Marxist-Leninist term, “wither away”.

These officials, while not disputing many facts of the case, say that if anything, the scheme reveals weaknesses in Iran’s security agencies, and the increasingly fractured state of Iran’s government as it faces intense international pressure.They also questioned the wisdom of the White House strategy in using the affair to rapidly push for tougher sanctions on Tehran, increasing regional tensions.”A lot of people basically feel really suspicious about this,” one official said, questioning the White House’s motivation “in ratcheting this thing up so quickly.”Like others, this official insisted on anonymity because he was not authorized to speak publicly.A second U.S. official said he shared those concerns, and questioned whether new sanctions, especially unilateral U.S. ones, would have much more than a cosmetic effect on the already heavily sanctioned country.The consensus view in the administration is that Iran’s supreme leader, Ayatollah Ali Khamanei, probably knew of the alleged plot to kill Saudi Arabia’s ambassador in Washington, while President Mahmoud Ahmadinejad did not.But the skeptical officials said there is no hard evidence Khamanei knew or approved of the plan.A criminal complaint unsealed this week charges an Iranian-American now in custody, Manssor Arbabsiar, and Gholam Shakuri, a reputed member of Iran’s shadowy Quds Force, of conspiring to kill the ambassador, Adel al-Jubeir.RAISED EYEBROWSThe odd facts of the case — including Arbabsiar’s apparently bumbling nature, and his approach to a supposed Mexican drug cartel figure, who happened to be a U.S. federal informant — have raised eyebrows among Iran specialists.Some U.S. officials said this week they were initially skeptical of the alleged plot, but ultimately were convinced by evidence linking the affair to Iran and the Quds Force, the covert operations arm of Iran’s powerful Islamic Revolutionary Guard Corps (IRGC).As far as is known, there is no division among Obama’s closest advisers over the plot evidence or the threat it represents.The White House strongly defended its handling of the case and its diplomatic strategy in the last few days.”You have a clear case of a plot to assassinate a diplomat in the United States that is tied back into the senior levels of the Iranian Quds force. So the facts themselves demonstrate the seriousness of the issue,” said White House Deputy National Security Adviser Ben Rhodes.”We have not in any way gone beyond those facts,” he said.Asked about the way the administration went public with the alleged plot, including a news conference by Attorney General Eric Holder, Rhodes said the White House followed “an established order” for such cases, including presenting a suspect in court, compiling a public charging document and then holding the Justice Department news conference.”We handled this as we would handle a high-profile incident with obvious international implications,” Rhodes said.ELECTION MODEBut Paul Pillar, a former top CIA analyst, said the strong words from Obama and Secretary of State Hillary Clinton also reflect the coming election.”They’re in a re-election mode and making sure that they sound … tough on Iran,” said Pillar, now a Georgetown University professor. “It just gives additional red meat for those who would like to push us toward even more confrontation, especially in the use of military force.”The White House has not signaled it will respond with military force. And some of the skepticism over the Iran plot may be a hangover from the case President George W. Bush made for war in Iraq in 2003, based on Iraqi weapons of mass destruction that were never found.Differences over how the plot is viewed are a rare example of division within an administration that prides itself on unity.Knowledge of it was closely held within the U.S. government until the complaint was released on Tuesday, officials said.Since then, the White House has overseen an aggressive U.S. diplomatic strategy to confront Iran, sending teams to brief allies and demanding more sanctions on Iran.Obama said on Thursday the United States would press for the “toughest sanctions” possible against Iran. One target is Iran’s already heavily sanctioned transportation sector, an official said.Yet as Clinton acknowledged in a Reuters interview on Tuesday, Iran is already under an array of sanctions, including United Nations, U.S. and European Union penalties. She suggested Washington was hoping other nations will now be compelled to enforce existing sanctions more stringently.”The administration wants and needs to use this moment as evidence of the dangers of Iran and they want to use it to catalyze further international pressure,” said Juan Zarate, a top counter-terrorism aide to President George W. Bush.”I don’t think we would be making the charges we are unless there is a body of data out there that buttresses our sense that the Iranian leadership, at least at the highest levels of the Quds force, is behind it,” said Zarate, now at the Center for Strategic and International Studies.The strongest evidence that the Quds Force was behind the plot are wire transfers of almost $100,000 that Arbabsiar facilitated to an undercover U.S. government bank account.While the details are still classified, one official said the wire transfers apparently had some kind of hallmark indicating they were personally approved by Major General Qasem Soleimani, head of the Quds Force.THEORIESWhether the plot went any higher than that is not known.While Obama has not publicly fingered Khamanei or Ahmadinejad, some U.S. officials say the supreme leader must have been involved somehow.But that case is based entirely on analysis of how the Quds Force has operated in the past, not hard evidence, officials acknowledged.Some officials with expertise on Iran’s activities believe that there are equally plausible alternatives.Because of the plot’s amateurishness, one explanation is that it was an operation by “rogue” elements within the Quds Force, a person familiar with internal administration policy debates said.One theory, skeptical officials said, is that the plot was a kind of “Hail Mary” pass, a long-shot attempt to harm a member of the Saudi government, which Tehran loathes. Another is that it was a “test” by Quds Force elements to see how effective U.S. defenses are.According to this theory, the Quds Force and IRGC, which played a major role in quashing mass peaceful protests following Ahmadinejad’s contested 2009 reelection, may have felt emboldened by their success and allowed more “free rein” by ruling ayatollahs to launch exotic operations in support of the regime.Instead of being under Khamenei’s rigorous control, this theory goes, the alleged assassination plot indicates a lack of oversight of the IRGC and Quds force by Iran’s leaders, who historically have sought to needle the United States but have usually restrained themselves from bold moves which might provoke a violent U.S. reaction.Still, one senior U.S. official said, “There shouldn’t be skeptics.”“You can say: ‘Why the hell would anyone be so stupid?’ That’s fair game. But you can’t translate that into innocence.”

“It is estimated that currency manipulation costs our economy over a million jobs,” said Steny Hoyer, the No. 2 in the House of Representatives Democratic leadership. “I urge the Republican leadership to put the currency bill on the floor.”Earlier this week, the Senate voted 63-35 to pass a bill aimed at China by allowing companies to seek U.S. government “countervailing duties” against goods from countries with undervalued currencies.Many U.S. lawmakers contend that China undervalues its currency by as much as 15 to 40 percent to give its companies an unfair price advantage in international trade.House Speaker John Boehner says he fears the bill could start a trade war and has refused to bring it to the floor for a vote, even though a similar measure passed the House last year 348-79.”They don’t want this bill on the floor for one reason: it would pass,” said Representative Sander Levin, the top Democrat on the House Ways and Means Committee. “The speaker should let the House work its will.”Representatives Tim Ryan and Betty Sutton, two Democrats from Boehner’s home state of Ohio, also said they had no intention of letting the issue drop.Democrats hope Republican lawmakers will hear from constituents on the issue when they return to their districts next week.The Obama administration says it shares the goal of the legislation, which is getting China to revalue its currency. But it has raised concern that some provisions in the Senate bill could violate World Trade Organization rules.Meanwhile, the Treasury Department faces a Saturday deadline to issue an semi-annual report on whether any country is manipulating its currency for an unfair trade advantage.The Obama administration, in five previous reports, has pushed China to move more quickly to revalue its currency. However, it has declined to take the step of formally labeling China a currency manipulator.

* Suzuki: VW must sell back stake if it fails to act* Suzuki: may consider other steps to prompt action from VWBy Mayumi NegishiTOKYO, Oct 14 (Reuters) - Suzuki Motor Corp accused Volkswagen of breaching a partnership pact by withholding hybrid technology it promised to share, pushing their two-year-old alliance to the brink of disintegration.Japan’s Suzuki has served VW with a notice of breach of contract, demanding the German company give it access to key technologies within weeks. Unless it does so, Suzuki’s biggest shareholder must sell back its stake and quit the alliance, it said on Friday.”The whole point of the partnership was to gain access to key technologies, such as those for hybrids and environment technologies,” Executive Vice President Yasuhito Harayama said at a news conference in Tokyo. “If VW can’t honour that, it must return Suzuki’s shares immediately.”The latest exchange of accusations deepens a feud between the two car makers. Last month, VW accused the Japanese company of breaching their agreement by procuring diesel engines from Fiat and is demanding it end that cooperation.VW bought a 19.9 percent interest in Suzuki for about 1.7 billion euros ($2.3 billion) in January 2009. At Thursday’s closing price that stake was worth $2.4 billion.”There is not enough invested on either side to justify the effort to try to salvage the relationship. Both can and will eventually walk away,” said Kurt Sanger, auto analyst at Deutsche Securities.Suzuki, which says it has yet to hear a proper response from VW about a proposal for a divorce, may consider other steps if VW ignores the notice, Harayama said.Last month, Suzuki chairman and CEO Osamu Suzuki offered to buy those shares cash on hand, and in return, promised to offload its 1.5 percent stake, worth $1 billion, in Volkswagen back to its estranged German partner.Billed as a partnership of equals, the tie-up was meant to bolster VW’s presence in India for small cars and give Suzuki access to technology it could not afford to develop on its own but the partnership has so far failed to deliver any meaningful cooperation.”If this situation is not resolved quickly, it does not mean that Suzuki is in trouble, but it is in neither companies’ interest for this uncertainty to drag on for too long,” said Harayama, adding that Suzuki’s engineers are now happily developing new products without additional outside help.In 1998, Suzuki joined a strategic partnership with General Motors , which took a 17.4 percent stake in the Japanese firm. That unravelled in 2006 when the U.S. car company sold most of its stake as it scrambled for cash amid ballooning losses.Suzuki’s shares dipped 0.5 percent to 1,650 yen, broadly in line with the Nikkei’s 0.8 percent fall in Tokyo trading.The Suzuki crisis for VW comes as it tries to juggles other deals including a Porsche merger and plans to combine the truck-making business of MAN and Sweden’s Scania .”Suzuki is very good at making practical relationships when it needs something,” such as a diesel engines in India from Fiat or an OEM agreement with Nissan , said Sanger from Deutsche. “It does not need to go out and remarry tomorrow.”

The European banks were Barclays Bank Plc, BNP Paribas , Credit Suisse Group AG , Deutsche Bank AG and Societe GeneraleFitch said it expects to resolve the ratings watch within a short time and to take corresponding rating actions where warranted.

Police have detained a former executive of VietinBank’s Nha Be branch in Ho Chi Minh City on charges of fraud, the Tuoi Tre newspaper run by the Ho Chi Minh City Communist Youth League said.The former executive and another staff of the bank, who is also in police detention, have falsified contracts between the bank branch and securities firms to misappropriate funds, Tuoi Tre quoted police sources as saying.The two have also used fake deposit contracts as collateral to get loans from banks and raised deposits from traders and investors on the over-the-counter stock market, it said.The credit scam has raised concerns over lenders’ asset appraisal and management, said Nguyen Tuan, director of APEC Securities Co.”Investor’s confidence in the stock market has been severely hurt and led to sell-offs,” he said.The benchmark VN Index has fallen around 14 percent this year.SALE OF AILING BANKSThe report of fraud emerged at a time when Vietnam’s central bank is drafting a restructuring plan, paving the way for mergers and acquisitions among banks, in a move to step up the restructuring of the sector hit by rising bad debt.The State Bank of Vietnam is drafting the plan that included considering mergers and acquisitions to deal with small, struggling banks, an online report by the newspaper Sai Gon Tiep Thi newspaper said on Thursday.After years of high credit growth, bad debt in Vietnam’s banking system reached 3.04 percent of all loans at the end of July from 2.16 percent at the end of 2010, according to government statistics.The central bank has said bad debt could rise to 5 percent of total loans by the end of 2011, but many economists and bankers say the true level of non-performing loans in the system is likely to be higher than the official figures.The newspaper report did not give any bank names for possible mergers and acquisitions or any timeline for the central bank’s plan.At several banks, non-performing loans exceed the value of their equity, Sai Gon Tiep Thi quoted Le Xuan Nghia, deputy chairman of the National Financial Supervisory Council, as saying.Officials at the central bank were not reachable for comments.Vietnam has more than 40 partly private banks, led by VietinBank and Vietcombank , as well as four fully state-owned banks, two of which are policy lenders.State-owned Agribank, the country’s largest bank by assets, had bad debt that accounted for 6.67 percent of its outstanding loans at the end of August, said the ruling Communist Party’s bureau that watches state-run businesses. ($1=20,880 dong)

* To open 210-235 US stores in FY’13, US capex $6-$6.5 bln* Shares up 2.5 percent at $56.10By Jessica WohlOct 12 (Reuters) - Wal-Mart Stores Inc is finally seeing sustained improvement at its U.S. discount chain, with sales at Walmart stores open at least a year rising for three months straight, Walmart U.S. Chief Executive Bill Simon said on Wednesday.Walmart is also gearing up to open up to 385 U.S. stores over the next two years, most of them supercenters, as it tries to retain and expand its dominance in the U.S. retail industry.Shares of Wal-Mart jumped 2.5 percent to $56.10 in late morning trading.Same-store sales account for about 98 percent of Walmart’s total sales in the United States, so fixing the slump at existing stores is critical for the world’s largest retailer.Walmart U.S., by far the company’s largest business, has posted nine consecutive quarters of same-store sales declines. While such sales rose in July, the last month of the fiscal second quarter, same-store sales fell 0.9 percent in the quarter.Walmart U.S. same-store sales continued to rise in August and September, Simon said at Wal-Mart’s 18th annual meeting for the investment community in Rogers, Arkansas, which is also being broadcast over the Internet. Traffic in stores has increased, led by traffic in the food department, Simon said.For the current third quarter, the company previously said Walmart U.S. same-store sales should be down 1 percent to up 1 percent.STEPPING UP STORE OPENINGS WITH LOWER CAPITAL EXPENDITURESWalmart opened about 153 U.S. stores and spent about $7.3 billion on capital expenditures in fiscal 2011. Now, the company is preparing to open many more stores at a lower cost.In total, the company plans to open 142 to 150 U.S. stores this fiscal year, which ends in January. It plans to spend $6.5 billion to $7 billion on capital expenditures this fiscal year.Walmart currently has five Walmart Express stores, which it began testing in June. It plans to have 11 by the end of the fiscal year, said Karen Roberts, president of Walmart Realty.In fiscal 2013, Walmart plans to open 210 to 235 U.S. Walmart stores and spend $6 billion to $6.5 billion on capital expenditures.Walmart U.S. plans to open 130 to 135 supercenters and 80 to 100 small-to-medium stores next year, Roberts said.Supercenters remain Walmart’s primary growth vehicle in the United States, though new supercenters are smaller than in the past at roughly 90,000 to 120,000 square feet. Before, supercenters averaged about 185,000 square feet.Most of the small-to-medium stores built in 2013 will be Neighborhood Market stores, which are Walmart’s version of a grocery store. The financial returns of Neighborhood Market stores are approaching those of supercenters, Walmart says.Walmart U.S. is working on lowering prices for shoppers by a cumulative $2 billion over the next two years as it works on trying to get them to shop more often, Simon said..The money for the price reduction plan will come from changes such as reducing new store and remodeling costs as well as improving productivity and efficiency in areas such as stores, distribution, transportation and marketing.

Stocks wavered between gains and losses throughout the session. Markets have been reacting to news from the euro zone where officials are trying to contain a debt crisis that threatens large European banks and global financial stability.The focus now will shift to earnings season, which begins with Alcoa Inc’s (AA.N) report after the close of trading. U.S. economic indicators have shown signs of slow growth and investors are waiting to see how this has affected company profits.”Earnings are always important but even more so here after several quarters of solid earnings across many industry sectors. I think investors are going to want to see that continuing or solidifying itself. Otherwise you could see further selloffs,” said Michael Cuggino, president and portfolio manager of Permanent Portfolio Funds in San Francisco.Materials stocks fell throughout the third quarter on worries about global growth slowing. Alcoa gained 2 percent to $10.30 in regular trading but is down 35 percent since the beginning of the third quarter.After the market closed, Alcoa said third-quarter profit jumped from a year ago, but earnings and revenue slipped from the second quarter as economic growth slowed from the first half of this year.A delay in a key vote by Slovakia on expanding the euro zone rescue fund has also kept investors cautious.With 16 of 17 euro zone states having ratified a pact to boost the size and powers of the European Financial Stability Facility bailout fund, all eyes turned to Slovakia. The country’s finance minister said the country was expected to approve the changes this week.Any more delays in coming up with a plan intended to head off crisis could give the market an excuse to sell. Stocks have reached the top of a recent range, hitting resistance around 1,195 on the S&P 500. Another area of resistance is seen at 1,215 on the S&P 500, said Larry Peruzzi, senior equity trader at Cabrera Capital Markets Inc in Boston.”The bounce we’ve had is kind of getting us close to resistance levels … we’re looking to see if it can break through,” he said.Apple (AAPL.O), which gained 3 percent to $400.29, lifted the Nasdaq and S&P 500.The Dow Jones industrial average .DJI was down 16.88 points, or 0.15 percent, at 11,416.30. The Standard & Poor’s 500 Index .SPX was up 0.65 point, or 0.05 percent, at 1,195.54. The Nasdaq Composite Index .IXIC was up 16.98 points, or 0.66 percent, at 2,583.03.After the close, Alcoa, the largest U.S. aluminum company, dipped slightly $10.03 after it posted results.In the past week, analysts have lowered their consensus earnings estimates for Alcoa, citing a precipitous drop in metals prices in recent months sparked by global economic concerns.About 6.90 billion shares were traded on the New York Stock Exchange, NYSE Amex and Nasdaq for the day, well below the year’s daily average so far of 8.03 billion.Advancing stocks outnumbered declining ones on the NYSE by a ratio of roughly 16 to 13, while on the Nasdaq, advancers beat decliners by about 3 to 2.

The past week’s riots that began in London and spread through England generated headlines, discussions and some hard-hitting images. Photographer Sandy Danbury documented both the violence and the aftermath in this dramatic picture series. View this week’s Your View showcase here.